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Gold is not glittering

Gold and silver prices continued to trade close to their lowest level in five years in Asia trade amid rising expectations that the U.S. Federal Reserve will raise interest rates later this year. Gold dipped below $1,100 an ounce in early Asia hours and quickly regained on bargain hunting. It is trading at $1,104.08/oz.

“I think there is still going to be a little bit of pressure,” said Victor Thianpiriya, a commodity strategist at ANZ Bank. “Prices could head lower.”

In India, gold is likely to fall below Rs 25,000 per 10 gm, and possibly sell in the range of Rs 20,500-24,000 per 10 gm if the US Fed raises dollar interest rates this year, a research analyst from India Ratings.

Gold prices plunged to as much as 4 percent to their lowest in the more than five years as sellers in top consumer China has offloaded the metal. China has dumped a huge amount of gold on the market, resulting in the sharp decline in the value of the yellow metal. It was also hit by the news that China`s official gold reserves have risen to almost 60 percent over the past six years, according to the first official data on the subject since 2009.

Investors are finding less and less reason to hold gold as an insurance against risk, while the dollar is strengthening ahead of what is expected to be the first increase in US interest rates for nearly a decade. The dollar has hit a three-month high against a basket of currencies, making dollar-priced gold more expensive for holders of other currencies.

Investors are continuing to shun the precious metals and invest in the dollar as their preferred sanctuary from volatile markets. Geopolitical developments following Greek debt deal and Iran nuclear agreement too has weighed on bullion rate.

World Gold Council computation method called "all-sustaining costs", states that the cost of producing one ounce of gold varied from $914 per ounce to $1,031 for three top gold producers in 2013. "All-sustaining cost" is defined as the actual costs incurred in mining and refining of gold, transporting it and then adding the cost of capital and corporate overheads, excluding initial project costs and the cost of paying dividends to shareholders.